The economic downturn, triggered by the ongoing COVID-19 outbreak, has created a hole through which money launderers and fraudsters seek to amass huge sums of cash by resorting to illicit trade, including financial crime, security experts warn.
In many cases, criminals and terrorists are attempting to profit by posing as genuine businesses, an ominous symptom that signals the ongoing outbreak might lead to an increase in organised crime.
In view of the situation, financial security experts recommend collective efforts, including across law-enforcement agencies, to combat illicit trade in order to generate national revenue and accelerate the country’s economic recovery and development activities.
Furthermore, regulatory bodies must consider whether the current internal control and compliance frameworks can identify COVID-19 related fraud and illegal activities.
Firms must be able to satisfy regulators by demonstrating updated risk procedures and internal control mechanisms to reduce risks of any possible financial crime, they added.
‘Trade-based money laundering is mostly committed in Bangladesh. The government is firmly committed to tackling this serious issue to save its economy,’ said Abu Hena Mohd Razee Hassan, Bangladesh Financial Intelligence Unit head of the Bangladesh Bank.
‘At the beginning of the pandemic, we instructed banks and other financial institutions to take strict measures so that none can take advantage of the new circumstance,’ he added.
Referring to a recent study, he informed, around 80 per cent of illegal capital flight globally took place through illicit trade, or around 60 per cent in Bangladesh.
‘Developing nations are mostly vulnerable to such risks as it has become a major threat to their growth and sustainable development. Taking these into consideration, Bangladesh is fully committed to remain at the forefront of global efforts to fight Trade Based Money Laundering and Terrorist Financing risks,’ he added.
Against this backdrop, considering the fact that international trade transactions are mainly held through the banking system of the country, BFIU has issued guidelines for banks suggesting they establish appropriate measures and techniques to combat TBML/TF, he said.
At the beginning of 2020, of the Customs Intelligence and Investigation Directorate director general Muhammad Mubinul Kabir told the media that global trade was disrupted by the emergence of the coronavirus outbreak that had devastated normal life in all parts of the world.
The government of Bangladesh has responded to the pandemic with a comprehensive set of measures, including travel restrictions, social distancing measures, strict hygiene protocols and direct interventions in national economies, he added.
With global supply chains severely disrupted and economic activities halted for travel and transportation restrictions to check transmission of coronavirus, some organised transnational crime networks have taken advantage of ineffective regulatory frameworks and supply shortages.
The problem is so large that the World Economic Forum estimates over $2.2 trillion, some 3 per cent of the global GDP, will be lost due to illicit trade leakages in 2020. Many of these will double within five years.
Counterfeiting and smuggling of fake, tainted or counterfeited alcohol and tobacco products have become big business for criminals, as lockdowns and bans on excisable goods cost governments hundreds of millions of dollars in lost revenue.
For example, a ban on cigarette sales in South Africa fuelled a black market that cost the finance ministry around $2.2 million per day. Similar losses were seen in Malaysia and the Philippines, which have also had cigarette bans during lockdowns.
The United Nations Office on Drugs and Crime has warned that COVID19 has created new opportunities for organised crime to profit, including human traffickers who are increasingly active and preying on people who are more vulnerable than before due to the economic costs of the pandemic.
Often the ‘front door’ is illicit tobacco sales or financial crime but behind that is a more sinister business of trafficking and modern slavery.
As markets reopen, and COVID restrictions are gradually lifted, it is vital that organised criminal groups are not allowed to prosper further by capitalising on job losses and dwindling buying power.
To protect against illegal activities, the director general said, the government instructed all concerned to remain more aware and check illicit trade with strict hands.
Muhammad Mubinul Kabir said that, so far, a total of 82 cases, involving around Taka 3,200 crore, have already been filled on tradebased money laundering.
The Global Financial Integrity report has ranked Bangladesh as one of the top countries facing trade-based money laundering (TBML), which is a significant threat to growth and sustainable development.
Centre for Policy Dialogue senior research fellow Towfiqul Islam Khan said that the government had adopted a new strategy titled ‘National Strategy for Preventing Money Laundering and Combating Financing of Terrorism 2019-2021’ to combat trade-based money laundering and illicit financial outflow from the country.
He urged the authorities concerned to implement the strategy effectively and check illicit trade to help the country achieve development goals.
The budget for fiscal 2020-21 has imposed 50 per cent penalty on misdeclaration of exports, imports and investment in foreign countries. This seems to be a sound proposal from the revenue point of view.
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